The benefits of a free-trade deal with Japan

THERE WAS a time, a couple of decades ago, when the trade relationship between the United States and Japan was one of the hottest policy issues in Washington. The rise of China, coupled with Japan’s two decades of economic stagnation, eclipsed concerns — overblown in hindsight — about this country’s chronic trade deficit with Japan. Now, U.S.-Japan trade is once again rising on the policy agenda, and it’s critical for both countries and for the world that Americans avoid the simplistic and emotional arguments that marred past debates.

On Friday, Prime Minister Shinzo Abe announced that Japan will join the Trans-Pacific Partnership (TPP) free-trade talks, a U.S.-led effort to bind a dozen Pacific Rim nations in a tariff-slashing pact that will boost efficiency and growth across a region that, including Japan, accounts for 40 percent of the world’s economic output.

Mr. Abe did so at considerable political risk, because the prospect of liberalized imports frightens Japan’s farmers and other entrenched interest groups. Mr. Abe recognizes that greater international competition could spur much-needed restructuring of Japan’s domestic economy, which, along with monetary expansion and fiscal stimulus, is one of the new prime minister’s three policy “arrows.” A TPP deal that includes Japan could fortify the U.S.-Japan alliance as a peaceful counterweight to an ambitious China.

TPP, therefore, serves U.S. strategic, as well as economic, interests. Alas, some of the same voices that often oppose free trade are already raising red flags. On Thursday, eight senators and 35 members of the House, all Democrats, sent President Obama a letter complaining about U.S. carmakers’ historical lack of access to Japan’s auto market, suggesting that, with a year-end deadline for completing the talks, it’s too late to resolve “these long-standing, economically harmful practices.” But the point of free trade is to enable each country to maximize its comparative advantages, not to guarantee equal flows of every good in each direction. Actually, the potential opening of Japan’s agricultural and other markets to U.S. goods under TPP could offset deficits that might persist in the auto market.

The twin goals of shoring up Asian allies and reducing our trade deficit would also be served by maximizing U.S. natural gas exports — especially to Japan, which is eager for stable new energy supplies to replace lost nuclear generating capacity. Again, some in Congress object, on the protectionist grounds that exports would raise the price of gas for U.S. users, both industrial and residential. And, once again, Economics 101 argues for the freest possible trade. Robust foreign demand for U.S. gas will promote greater production over the long run, and the additional supply will help moderate prices at home and abroad.

Fortunately, Mr. Obama has embraced the strategic and economic potential of TPP and of a similar proposed agreement with Europe. To bring them into being, he’ll have to push back against those in his own country, and his own party, who can’t let go of yesteryear’s trade conflicts.

Read more on this subject:
Fred Hiatt: Shinzo Abe’s new agenda: Better ties with U.S.